TAMPA — Jill and Scott Kelley's foreclosure defense reads like a breezy history of the nation's housing woes more than a staid legal filing.
"The real estate bubble formed because lenders grossly deviated from historically sound lending standards. … The lenders with their teams of financial analysts absolutely knew that they were creating and continuing to lend into a bubble."
The Tampa couple at the epicenter of a scandal that cost CIA director David Petraeus his job are waging an aggressive and unusual foreclosure defense to keep their now-iconic Bayshore Boulevard home. Their bank wants to foreclose, saying the Kelleys haven't made a loan payment since September 2009 and owe the bank $1.7 million.
In a defense outlined in papers filed in the foreclosure, the Kelleys are portrayed by their attorneys as victims of unsound lending practices by bankers.
They have filed a counterclaim against Regions Bank, accusing the bank of instructing the Kelleys to stop making mortgage payments so they would qualify for a loan modification.
The modification, however, was never approved, they said.
The Kelleys, their attorneys and attorneys for the bank could not be reached to comment.
The couple's Bayshore home with its view of Hillsborough Bay has become a local landmark since national media descended on Tampa for the Petraeus scandal. The Kelleys purchased the brick, 4,800-square-foot mansion for $1.5 million in 2004, records show.
Over this past summer, Kelley, 38, told an FBI agent about anonymous and threatening emails she had received. An investigation into the emails later exposed an extramarital affair between Petraeus and Paula Broadwell, his biographer.
Broadwell apparently sent emails to Kelley warning her to stay away from Petraeus, former commander of U.S. Central Command at MacDill Air Force Base, and Gen. John Allen, the U.S. commander in Afghanistan and former acting and deputy director of CentCom.
The Pentagon also is investigating whether Allen and Kelley shared inappropriate emails.
The controversy has delayed Allen's elevation to supreme commander of NATO troops in Europe. Allen's command did not return calls seeking comment. And Pentagon investigators declined to comment.
Images of the Kelleys' postcard-perfect home have been beamed around the world.
"Now that the real estate bubble has burst," the Kelleys' attorneys said in a Dec. 10 court filing, "the lenders are acting shocked and appalled at the massive default rates. They appear to have forgotten their knowing plunge into the world of relaxed and untested lending standards."
The Kelleys say AmSouth Bank, which later merged with Regions, relied on an inflated appraisal of their home and knowingly assumed the risk that property values would fall, leaving the Kelleys' mortgage worth more than their home.
The Kelleys have filed a series of "affirmative defenses" in the foreclosure case since the bank filed suit in 2010. The couple's attorneys sought to amend the defenses in December, expanding the argument about unfair lending practices.
Last week, Regions' lawyers filed a motion objecting to the amendment, saying it is not legally justified. The bank's attorneys said the latest defenses by the Kelleys are "purely an effort to delay and thwart the plaintiff's foreclosure action."
A judge has yet to rule.
January used to be a happy time for the Kelleys. They entertained military brass at their home during Gasparilla. The couple isn't saying whether that tradition will continue this year, though it seems unlikely. Gasparilla is set for Jan. 26.
MacDill officials, meanwhile, have not issued any instructions to base personnel about attending any festivities at the Kelleys' home this year.
Also unclear is the status of an investigation by base officials of the Friends of MacDill program. Jill Kelley and others got unescorted access to MacDill through the program.
Base officials did not return calls seeking comment.
Times staff writer Amy Scherzer contributed to this report. William R. Levesque can be reached at [email protected]